Can Big Hotel Stocks Continue to Deliver?

A technical look at the industry's biggest players

When it comes to occupancy rates and revenue per room, hotel stocks are enjoying a surge in profits. In fact, these two key metric areas suggest that the industry is in better shape than it was going all the way back during the dotcom years at the turn of the century.

The only question is whether or not this seemingly bullish development playing out over the past seven years is finally baked into the current price of hotel stock stocks. Investors can certainly appreciate a resurgent hotel industry, but if it’s growth they desire going forward, large hotel chains may not be able to deliver the catalysts required to propel shares higher.

After the financial crisis, many of the larger hotel groups were forced to sell off property and focus on management instead of ownership. Investors still concerned with shock events (9/11 attacks, financial crisis, etc.), and the effect they’ve had on the industry as a whole may soon begin to weigh heavily on the prices of related stocks.

With battle lines drawn, let’s dive into three big hotel stocks to see if Profit Scanner can give some technical insight to determine whether or not key industry players are likely to participate in the current relief rally in the short-term.

Hotel Stocks: Hyatt Hotels (H)

Hyatt Hotels (H) is a major player in the travel and leisure industry benefiting from an equity market tide that has been lifting most boats over the past few weeks. On Mar. 1, Profit Scanner gave us a short-term bullish crossover between price and its 21-day moving average. As long as the price of the stock remains above this line, investors should see continued price appreciation.

Moving averages are used to smooth volatility or “noise” in the price series, to make it easier to discover the underlying trend. Keep in mind that a 21-day moving average tends to produce frequent buy and sell signals. That’s because the moving average ends up hugging the price of the stock closely.

A tighter moving average is generally beneficial to short-term traders versus those who invest over the intermediate- to long-term time horizons where a 50, 100 and 200-day moving average would be more appropriate.

Hotel Stocks: Marriott International (MAR)

Marriott International (MAR) is another well-known player in the industry. While the stock has seen nothing but bullish short-term signals throughout February, the stock was slapped with a short-term bearish tag under an event labeled “Commodity Channel Index.” Events are clickable links, and choosing this particular event gives us a graphic of the CCI above the price chart to compare the two over time.

The CCI indicator tells us that price is relatively far from its 20-bar average price. It measures the deviation of the price from its average value (comparing to a chosen moving average, typically 20 bars). The oscillator is normalized by dividing by the typical deviation, so we get an oscillator fluctuating roughly between +100 and -100. Many traders use these as overbought (+100)/oversold (-100) markers and watch for signs of reversal.

Hotel Stocks: Hilton Worldwide (HLT)

Hilton Worldwide (HLT) is also on the rise after crossing above its 21-day moving average.

On Feb. 26, we received a bullish event for HLT called the “Williams %R.” Clicking on the event link displays the indicators and places a red box around the signal we should pay attention to.

Looking at the Williams %R when compared to the price of the stock, we can see that price has recovered from oversold territory in the short-term (dropped below -80 then rose above). With Hilton, there is clear evidence that the trend has reversed (continued through the -50 level).

If all the technical speak seems a bit confusing, there’s no reason to worry. For each type of event, there will be a description to match an indicator’s relevant signal, no matter what stock you decide to pull up in a search. With Profit Scanner tools, it’s like having a seasoned technical analyst by your side.

With the three hotel stocks all trading above their 21-day moving averages, bullish investors have good reason to hold on to shares in the hope that the industry will continue to participate in the market’s move higher over the short term.